Citigroup Inc (NYSE:C) has done a fantastic job, along with other major banks, at providing insight into their books during a remarkably difficult period for banking. The environment is impossible from a visibility standpoint, and Q1 data isn’t the driving issue that will define asset prices. So, the earnings report from a major bank right now is just about understanding to what extent they can provide credit in a temporarily collapsing economic context.
Whether it be BACs recap of deferred payments by segment or WFCs disclosure of loans per industry, it is obvious that the institutions have learned from the financial crisis. We are also seeing evidence of a prepared industry in terms of balance sheets, with the group aggressively building up reserves in anticipation of an increase in net charge offs and delinquencies.
C is right in that mix. The stock is trading at 0.5x book value which is a discount to peers. It's reserve build of $7.0 bln is alarming but also suggests that the bank is aggressively protecting its balance sheet – which is prudent. The expansion into credit cards is likely driving this action. But, at $43, the stock looks like a value play.
C also had the strongest revenue growth in the banking space in Q1 (12%).
Citigroup Inc (NYSE:C) trumpets itself as a diversified financial services holding company that provides various financial products and services for consumers, corporations, governments, and institutions in North America, Latin America, Asia, Europe, the Middle East, and Africa.
The company operates through two segments, Global Consumer Banking (GCB) and Institutional Clients Group (ICG).
The GCB segment offers traditional banking services to retail customers through retail banking, commercial banking, Citi-branded cards, and Citi retail services. It also provides various banking, credit card lending, and investment services through a network of local branches, offices, and electronic delivery systems.
The ICG segment provides wholesale banking products and services, including fixed income and equity sales and trading, foreign exchange, prime brokerage, derivative services, equity and fixed income research, corporate and consumer loans, investment banking and advisory services, private banking, cash management, trade finance, and securities services to corporate, institutional, public sector, and high-net-worth clients.
Even in light of this news, C has had a rough past week of trading action, with shares sinking something like -8% in that time. That said, chart support is nearby and we may be in the process of constructing a nice setup for some movement back the other way. Shares of the stock have powered higher over the past month, rallying roughly 11% in that time on strong overall action.
Our C Earnings Summary:
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Citigroup misses by $0.39, beats on revs
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Reports Q1 (Mar) earnings of $1.05 per share, excluding non-recurring items, $0.39 worse than the S&P Capital IQ Consensus of $1.44; revenues rose 11.6% year/year to $20.73 bln vs the $18.98 bln S&P Capital IQ Consensus.
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Delivered profitable quarter despite ~$5 bln increase in loan loss reserves due to CECL accounting change and economic outlook related to COVID-19.
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In GCB, growth in North America partially offset by Asia due to initial COVID-19 impact.
Our C Research and Conference Call Notes:
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Global consumer banking fared well considering the environment.
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The company saw slight revenue decline in Asia due to COVID-19 impacts in Q1.
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Loan balances are likely to pressured, but deposit growth is strong.
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The company sees Q1 net credit losses increasing in Q2.
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40% of branches are closed due to little use.
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The company revenue trends in second part of March will continue through much of the second quarter.
